As flexibility and service become the mantras of the mortgage market, lenders are finding increasing pressure being put on their IT systems to cope with complex products in greater volumes and quicker than ever.
Operating margins are being continually squeezed and both regulatory and compliance issues will heighten these financial pressures. The challenge is to provide more for less. For lenders with multiple legacy systems designed to deal with the more traditional range of products, problems are arising in terms of bringing flexible products to market, while offering levels of service to match those of the newer providers.
Graham Binns, business support manager for Bank of Ireland (BoI) personal lending UK, says BoI is having to set up a new administration and processing platform to deal with these problems. The bank’s legacy system has four or five components at the moment. This is not unusual, but he says it creates problems when trying to generate a single view of the bank’s customer base, and reaping the rewards that economies of scale, which the bank has, should deliver. He expects the new system to be in place by the middle of the year and deal with both new and existing business. The project is costing millions and has taken over two years to develop.
Binns comments: ‘Our service will get infinitely better and the system will take half the time to process applications through to completion, and allow us to step up volume without the need for recruiting extra staff.’
By having customer data centrally located, BoI will be able to assess its book of business more effectively, and Binns expects to access a raft of cross-selling opportunities which were hidden in the past.
To help brokers, there is also a link available into the back-office system, which will provide them with immediate decisions in principal and enable BoI to pre-populate applications when they are received, improving both accuracy and speed. The broker simply has to implement software, provided for free, to ensure they can access the system. For the BoI, a move to a centralised system will help in the battle against the newer, centralised lenders who have poured into the market in recent years. Without branch networks, and working from IT platforms designed to handle flexible products, Binns says newer lenders have had an advantage over the traditional lenders.
Brian Hall, senior consultant for IT provider Marlborough Stirling, agrees. He says: ‘Many lenders are constrained by the systems they have in place. They want to introduce new products but do not have the capability to deal with the back-end processing and administration required.’
Stand and deliver
Administration and processing capabilities determine what products and service levels lenders can deliver to their intermediaries. No matter how innovative a lender’s ambitions might be, if they are unable to deliver them they are worthless. This also goes for the personal relationships lenders have spent so many years developing with advisers. No matter how good they are, they will mean nothing if not backed up by efficient servicing and processing, according to Hall.
At the moment, Alan Rosengren, chief executive of intermediary, Falcon Group, believes the overall processing from lenders’ back offices is relatively good, although there is a lot of variety.
He says: ‘It depends on how long they have been around and the legacy systems they have to deal with.’ Like Binns, he points to some newly-established operations leading the way in terms of the speed and accuracy with which they handle applications.
As an intermediary placing business, Rosengren would appear to agree with Hall that personal relationships are becoming less important, with ‘simplicity and speed’ taking over as the overriding concerns.
The problem for larger players is the time and money they have to devote to such projects before reaping the rewards.
Following the merger between Halifax and Bank of Scotland, HBOS is still working towards a single processing operation for the combined mortgage business of the two lenders. Not only are they affected, but also subsidiary operations like Sainsbury’s Bank which outsources its administration to HBOS are waiting for the IT to be integrated. Outsourcing will become big business in the mortgage market, according to Hall. There are already operations such as Marlborough Stirling Mortgage Services and Home Loan Management, but their capabilities look set to grow as demand increases for what they offer.
Hall says: ‘As the need to be innovative increases, some lenders will not have the time to invest in IT and will look to outsourcing.’ If this proves to be the case, it will benefit the intermediary market as lenders are brought up to the minute in terms of their IT offerings faster than they would able to do so themselves.
While many lenders such as BoI will offer advisers a way into their administrative systems, this tends to present problems for the brokers. Each lender has its own security procedures to enter their system and when dealings are ongoing with multiple lenders this can create problems.
Rosengren says his company placed business with around 50 lenders last year. Remembering the appropriate details for each can be a nightmare and he longs for a centralised portal which can be entered and then allow intermediaries access to the lenders with which they have relationships. This will take time, but until the regulatory environment is certain, and lenders have completed in-house back-office streamlining, Phil Jenks, head of mortgage strategy and development mortgages for HBOS, believes it will not be a priority.
If lenders are to keep pace with the market leaders, they must move away from classing customers by product, and holding data on separate systems as has been done in the past. This will aid lenders in cross-selling into their customer base, and allow them to develop relationships with intermediaries based around accuracy, speed and reliability. It will not be a painless exercise for the providers, but one that is becoming a necessity.
Edward Murray is news editor